Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes consisted of the following for the years ended December 31, 2023, 2022, and 2021, respectively:

	Years ended December 31,
	2023		2022		2021
	(in thousands)
Current provision	$	—	$	—	$	—
Deferred expense	—		—		—
Provision for income taxes	$	—	$	—	$	—

The provision for income taxes was different from the amount computed using the federal statutory rate of 21% for the years ended December 31, 2023, 2022, and 2021, respectively, due to the following:

	Years ended December 31,
	2023		2022		2021
	(in thousands)
Income tax provision at federal statutory rate (21%)	$	(44,806)	$	(71,157)	$	(123,429)
Hong Kong Rate Differential	(59)		—		—
Interest on convertible securities discount	—		—		2,867
162(m) Limitation	1,488		—		—
Warrant expense	18		(189)		13,905
Meals and entertainment	27		21		26
Stock based compensation	16,408		7,989		(5,665)
Prior year true-up	(221)		(30,646)		—
Other, net	(231)		317		(365)
Valuation allowance	27,376		93,665		112,661
Provision for income taxes	$	—	$	—	$	—

Deferred income tax balances reflect the impact of temporary differences between the tax bases of assets or liabilities and their reported amounts in the consolidated financial statements and are stated at enacted tax rates expected to be in effect when the reported amounts are actually recovered or settled.

Principal components of net deferred tax balances at December 31, 2023 and 2022, respectively, were as follows:

	Years ended December 31,
	2023		2022
	(in thousands)
Deferred income tax assets:
Net operating loss carryforward (NOL)	$	320,416	$	294,335
Stock based compensation	66,251		56,743
Premium deficiency reserve	—		3,442
Unpaid claim reserve discounting	420		384
Operating lease liability	290		1,231
Fixed assets and intangible assets	1,590		1,589
Accruals	5,175		9,927
Goodwill & Intangible	3,601		—
Other	800		4,692
Total deferred income tax assets	398,543		372,343
Less: valuation allowance	(396,906)		(369,530)
Total deferred income tax assets, net of valuation allowance	1,637		2,813
Deferred income tax liabilities:
Operating lease right-of-use assets	(672)		(845)
Nontaxable gain on deconsolidation of entity	(943)		(1,936)
Other	(22)		(32)
Total deferred income tax liabilities	(1,637)		(2,813)
Net deferred income tax assets	$	—	$	—

Operating loss and tax credit carryforwards and protective tax deposits

At December 31, 2023 and 2022, the Company had a Federal net operating loss carryforward of $1,525.4 million and $1,401.6 million. Of the $1,525.4 million, Federal net operating loss carryforwards, $295.1 million begin to expire in 2033, and $1,230.3 million may be carried forward indefinitely, with the exception of net operating losses for the insurance companies. Under Internal Revenue Code Section 382, if a corporation undergoes and "ownership change", the corporation's ability to use its pre-change NOL. carryforwards and other pre-change tax attributes to offset its post-change income may be limited. The Company has completed a study through January 7, 2021 and concluded that ownership changes have occurred that may limit their utilization in future periods.

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. At December 31, 2023 and 2022, the company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2023 and 2022.

The Company does not have deposits admitted under Section 6603 of the Internal Revenue Code.

Impact of tax planning strategies

The Company does not have any tax planning strategies that include the use of reinsurance and there are no deferred tax liabilities not recognized.

The Company files income tax returns in the United States. The U.S. Internal Revenue Service ("IRS") is not currently conducting any income tax audits of the Company's returns. The Company's federal income tax returns filed related to tax years subsequent to 2020 remain subject to examination by the IRS. The Company is not aware of any material adjustments that may be proposed as a result of any ongoing or future examinations and does not have material uncertain tax positions reflected in the Consolidated Balance Sheets.

On August 16, 2022, the U.S. enacted the Inflation Reduction Act of 2022 (the “IRA”), which contains a number of tax-related provisions, including a 15% corporate alternative minimum tax imposed on certain corporations that meet an income-based test, as well as a 1% nondeductible excise tax on certain stock repurchases. The Company is not subject to the alternative minimum tax in 2023 based on the income-based test and it will continue to evaluate the IRA’s impact as further information becomes available.